Seizing an opportunity

Published on
March 23, 2010

If producers of new, market-ready farmed species have any ambition of cutting into Europe, then they would be hard-pressed to find a better window of opportunity than the next 24 months.

In terms of consumer demand, farmed Atlantic salmon rules European mass markets. But while leading salmon producers are seeing millions of Norwegian kroner added to their respective bottom lines, there’s growing stakeholder concern surrounding both depleted fish production, which is likely to prevail for at least two years, and unprecedented farm gate prices.

Analysts have predicted that salmon prices will fluctuate between NOK 30 (USD 5.09, EUR 3.74) and NOK 35 (USD 5.93, EUR 4.36) through the first six months of this year. But because of lower fish growth rates prices will climb to higher-than-normal levels in the second six months.

They say the average price for the year will be around NOK 34 (USD 5.73, EUR 4.24), but there are suggestions these estimations are far too conservative.

Norwegian-based aquaculture giant Marine Harvest has warned its peers against allowing prices to soar too high. The prevalent fear is that that if consumers are called upon to pay more for their regular salmon purchases many may make long-term switches to alternative species.

To date, consumers have been shielded from salmon price hikes. In fact, according to Kolbjorn Giskeodegaard, senior analyst Nordea Markets, the average price of salmon in the consumer market decreased every year between 2005 and 2009.

“I believe this is an important explanation of why salmon consumption continued to increase in 2009, which was a recession year,” said Giskeodegaard.

Producers had been able to grow European demand and offset prices by putting more product into the market. They were even able to meet the shortfall created by the much-documented problems in Chile’s salmon farming industry, ensuring the overall global supply fell just 2 percent to 1.47 million metric tons last year.

However, as a result of a horrendous Norwegian winter, these producers are no longer in a position to support mass market growth and prop up Chile. Global production is expected to fall at least another 5 percent this year to 1.36 million metric tons. But, more importantly, Norway’s production will drop to 930,000 metric tons. The situation is not expected to be any better in 2011.

This scenario creates a sizeable opening in Europe — a market that grows consistently more receptive to fish, be it farmed or wild, by the day.

It should be noted that the Norwegian Seafood Export Council (NSEC) claimed farmed Atlantic salmon consumption grew 8 percent last year, thanks largely to strong European demand. There was apparently less momentum in Japan and the United States.

The big question is which species are best suited to seizing this opportunity? Most new farmed species — or NFS as the term is often abbreviated — are far from new, but they are species that consumers aren't familiar with.

The fast-growing cobia (Rachycentron canadus) has been widely tipped as a fish of the future for as long as many of us can remember. Meanwhile, meagre (Argyrosomus regius) is a species that a number of Mediterranean farmers have been trialing in recent years.

There are many other NFSs waiting in the wings, and the forthcoming European Seafood Exposition (ESE) in Brussels, Belgium, will probably throw more light on the potential runners and riders.

Europe may not be saying it loudly just yet, but it needs more mid-priced, sustainably farmed species. It needs fish that can ease the pressure on salmon production while Chile rebuilds its industry, and it needs fish that can help sustain the growth of the entire seafood category.

The rewards speak for themselves. But despite the clear demand, as the NSEC has demonstrated time and again, any market breakthrough is certain to require plenty of corporate time, energy and money.

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Contributing Editor reporting from London, UK

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